Fintech Overtakes Bank, Becomes the Main Payment Option in Indonesia

A report from Standard & Poor’s or S&P entitled ‘Southeast Asia E-Money Market Report’ shows that Indonesians prefer payments from financial technology (fintech) to banks. The use of fintech services has boosted e-commerce transactions to games.

S&P noted that the use of fintech payment services in Indonesia is the largest in Southeast Asia. In 2019, electronic money transactions in the archipelago reached US$ 10 billion. Meanwhile, digital wallets (e-wallets) from fintech contribute around 72% of electronic money transactions in the country.

“Fintech has surpassed banks as the main payment provider in Indonesia,” was quoted as saying in the S&P Global report released Wednesday (27/1). In Singapore, Malaysia, and Thailand, bank payment services still dominate.

Fintech Makes It Easier for People to Make Payments

S&P said, fintech organizers in Indonesia build physical and digital infrastructure so that people can easily transact on the platform. The services most frequently used include money transfers, bill payments, and transactions in shops.

In addition, the digital ecosystem in Southeast Asia is being developed, namely e-commerce, ride-hailing and games. As a result, the use of fintech services has become more and more S&P, exemplifying GoPay in the Gojek ecosystem.

This fintech payment service can also be used to order transportation, e-commerce, food delivery and games. Likewise with OVO which is integrated with Grab and Tokopedia. Then, Shopee got into this business through ShopeePay.

S&P noted that the fintech affiliated with Shopee contributed more than 10% of electronic money transactions in Indonesia. Although DailySocial research shows that GoPay is still leading this year.

In Indonesia there is also fintech DANA which is a payment option on the e-commerce platforms Bukalapak and Lazada. Then, there is LinkAja, an alternative payment for Gojek and Grab. In addition, S&P noted that fintech in Indonesia has been boosted by the number of smartphone users.

A survey by the Indonesian Internet Service Providers Association (APJII) also showed that the number of internet users in the country reached 196.7 million as of the second quarter of 2020. The number increased 8.9% compared to 2018. S&P estimates that the use of fintech as a payment option in Indonesia continues to increase.

This Year, the Bank is Predicted to Expand Digital Services

Banks are predicted to expand digital services. “Banks are expanding billing and other services available through digital banking applications,” the report was quoted as saying. Previously, Bank Indonesia (BI) estimated that bank digital service transactions reached IDR 27,036 trillion last year. Meanwhile, this year the value is predicted to be IDR 32,206 trillion.

“This is much higher than the nominal gross domestic product (GDP) of our Indonesia,” said BI Governor Perry Warjiyo in a virtual event entitled “Building Optimism after the Covid-19 Pandemic”, last weekend (22/1).

Bank digital service transactions have been boosted by the soaring use of e-commerce during the corona pandemic. BI estimates, transactions in e-commerce will increase by 33.2% this year. Whereas last year, the value was estimated at IDR 253 trillion, an increase compared to 2019’s IDR 205.5 trillion.

Bank digital service transactions were also driven by the use of electronic money, which rose 32.3 percent from IDR 201 trillion last year to IDR 266 trillion in 2021. “About 15 banks are very aggressive in exploring digital services,” said Perry. “The corona pandemic is accelerating the digitalization of the economy and finance. This is extraordinary. “

The Financial Services Authority (OJK) noted that the accumulated lending by financial technology companies (fintech lending) reached IDR 155.9 trillion as of 2020. The Indonesian Joint Funding Fintech Association (AFPI) targets to provide loans this year at IDR 86 trillion.

If this target is achieved, then the disbursement of financing by fintech lenders will reach around IDR 241.9 trillion by the end of 2021. “Lending by fintech grew 91.3% on an annual basis (year on year / yoy) last year,” as quoted from the OJK report, Friday (29/1).